For those earners that very last dollar is essentially worth $0.497 ($0.471 pre-2018).

In essence you keep less than half of your earned money!

Talk about literally working for someone else!

This brings me to the fundamental question of: “Why are we killing ourselves for every last dollar, and accelerating our path to burnout, when some of us don’t even get to keep the majority of the earnings?”

I used to take pride in the fact that I barely took any vacations or stayed late to read additional studies in years past.

It was the classic case of diminishing returns.

These extras I did were typically piled on an already full workload.

By working longer hours, as well as more weeks in the year, than was typical for my specialty I never gave myself a chance to decompress/recharge my batteries.

It was an express train I had boarded and it’s destination was the land of Physician Burnout.

All this was done because I was chasing that least valuable dollar (I didn’t realize this at the time as I was blissfully ignorant).

So what has changed now?

Well as I have gotten closer to what I have considered financial independence, the quest for the almighty (diminishing) dollar has taken a back seat.

Even though I had what many physicians would consider a dream schedule already (I only worked Monday through Friday, 8:30 am-5pm with no night or weekend call), I still could feel the beginnings of burnout after 10+ years of doing it.

Because I started my FIRE path in my early 40’s, I put myself in my current position where I am no longer as dependent on my W2 wage as when I first started out.

I was therefore able to implement one of the greatest moves career- and emotion-wise: reducing my clinical workload.

I accomplished this by hiring a semi-retired Radiologist to cover one day a week (alternating between a Monday (giving me a 3 day weekend) or Wednesday off).

I essentially reduced my work schedule by 20% yet I know I gained far more than that because of it.

It gave me a chance to recharge those batteries and hit the remaining work days with far more energy.

Was there a financial penalty by doing this?

Of course there was but it really wasn’t as big as one would initially think.

Common math logic would suggest a 20% work reduction should result in 20% decrease in my pay.

I assure you this was not the case at all (and wonderfully illustrates how I took advantage of that least valuable dollar concept).

Using myself as a real-life example I will demonstrate how the math shakes out:

Every day I pay to have covered costs me $1700.

My general overhead averaged over 2017 was 25%.

So if I had chosen to work that day, the $1700 I would have received would lose $425 to overhead, netting me $1275 pretax.

This money (which qualifies as my least valuable dollar(s)) would have come in at my highest tax bracket (39.6%), so I would have lost an additional $504.90 to Uncle Sam.

Thus my true take home amount would be $770.10.

Sure $770.10 is still considered a lot of money (works out to about $40k/yr true take home pay I “left on the table”) but it is much more palatable than the initial sticker shock price of the $88k/yr I paid for the coverage.

It really brings a smile to my face that I can take advantage of the progressive tax system this way and cut out my least valuable dollar(s) first as I reduce my clinical workload and prolong my career and sanity at the same time.

One might even conjecture that the passive income stream I have established using my deployed capital (i.e. my “most valuable dollars”) is essentially working that one day off a week for me (and then some).

This is another way the FIRE movement has allowed me to not be dependent on every last W2 cent, as I am freely able to choose this option with no real detriment financially.

Pinning this (click on red “P”) is greatly appreciated.

Superpower Take-home points:

Avoid burnout and prolong your career by optimizing your practice to take advantage of the least valuable dollar concept

The true cost of locum tenem coverage is often far less than the upfront price when taking taxes and/or overhead expenses into consideration

BONUS:

Have you ever what I sound like?

Well wonder no more. [Spoiler alert I do not have the deep rich bass tones of James Earl Jones and am probably a lot closer to the Steve Urkel end of the voice continuum than I would care to admit.]

I am part of an illustrious panel that tackles this emotionally charged topic.

Hopefully you enjoy listening to it as much as I did participating.

Note:

If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys of finance.”

Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.

If you find yourself enjoying this blog, please add to Xrayvsn’s superpowers by subscribing (your email will be kept private and you will get up to date emails regarding the latest posts and bonus material like the net worth spreadsheet template I created).

As my email subscriber list grows it validates my decision to start this blog and to continue to try and provide worthy content for your eyes.

Thank you

NOTE: The website XRAYVSN contains affiliate links and thus receives compensation whenever a purchase through these links is made (at no further cost to you). Although these proceeds help keep this site going they do not have any bearing on the reviews of any products I endorse which are from my own honest experiences. Thank you- XRAYVSN

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Lack of Comments is Xrayvsn's Kryptonite. Please Rescue Him From His Fortress of Solitude And Leave A Comment

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Sc9182

Would it be better to donate that so-called-least valuable dollar(s) to a charity or contribute to DAF (make it a self perpetuating charitable Endowment with full control)? Of course, this may work best if you have 1099 than W2. It appears you have own/shared practice, charity may be better option, instead of chasing post tax gains, you may get better bang for buck with charitable contributions.

Hoping you can somehow minimize that 25% overhead though – it might help sweeten the charity contribution effort!

Alternatively, send a few 1099 bucks to that poor Aunt or nieces of yours!

Good point about charitable contributions could make the least valuable dollar more effective however with phase out of charitable deduction etc now in the tax law I don’t think it is available much at my level of income. And yes I’m W2 wage earner.

For me it’s just not worth it to work that extra day a week with such little return financially and giving up the chance to recharge my batteries

Great point about the least valuable dollar. The math works out nicely when you’re a high-income earner. My online income slows down quite a bit at the end of the year due to the holidays. I wasn’t stressing about it, but you gave me another reason to relax. Why chase the least valuable bits? Have a great holidays!

Thank you Joe. Yes this is one of the few things that a very high income earner actually has swinging in his or her favor. Glad I can give you more reasons to relax this holiday 🙂 Have a great holiday with you and your family as well. Thanks. 🙂

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5 months ago

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Dr. MB

Money never sleeps but your time and energy can be easily depleted.

Avoid chasing the “ last dollar “ in as many aspects of your life as possible. Often the law of diminishing returns kicks in fairly quickly.

Thanks Dr.MB. The Law of Diminishing Returns is exactly what this is about. Too many people kill themselves trying to earn more money only to see it vacuum away by taxes, etc.

On a side note, not sure if you saw my reply to your comment on Gasem’s blog, but I am definitely sad you are no longer blogging. I hope it is just a small sabbatical and you can continue after the holidays. (otherwise if you ever have a topic of interest you want to write about, my platform is always open for you).

This is a great post. These last dollars of the year really are the least valuable in that they are taxed at the highest amount. Chasing the almighty dollar certainly comes with a price! (Literally ha) Geez this just gave me so much less motivation to work hard these last couple weeks! ?

I appreciate the kind words Young Fire Knight. Sorry to make you lose motivation but for me my lack of motivation chasing these last few dollars has prolonged my career and likely has a bigger lifetime financial impact (working longer at a slower pace rather than flaming out quickly at a higher workload (with not that much more financial impact as I pointed out in this post). Have a great holiday and thank you for stopping by.

Not sure what the government gains by having its most productive people dial it in after they hit a certain level. If there was say a flat tax, I would venture to say that people would try to make as much as they can because the last dollar is worth the same as the first dollar so you get the same return. In the end the government will likely be able to bring in more revenue because of it.

I don’t think the progressive income tax is there as an equalizer – it would have to be a radically more progressive tax, even more progressive than the 91% top tax bracket that was established in the 1950s. Instead, progressive taxation is about stability and social cohesion. Bad things tend to happen in modernized societies where the young can’t/don’t find work. If the most productive people were given incentive to maximize their productivity, we wouldn’t need nearly as large a labor force and inequality would be exacerbated. Capitalism is already under assault, the last thing the government wants to do… Read more »

That is interesting line of thought for sure. A 91% top tax bracket would absolutely dis-incentivize anyone to work after a certain level and I agree that would create the need for another section of the population to take its place providing those with more jobs. I feel bad about complaining about my tax bracket which is trivial compared to a 91% one.

The 91% bracket actually existed, too – during a period of economic expansion.

Of course, the expansion was due to the baby boom and the GI bill and other secondary effects of WW2 and the wind-down of the U.S.’s wartime mobilizations, but still – we had a 91% top tax bracket yet managed to grow the economy.

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5 months ago

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Casem

At 91% the incentive is to cheat or buy into tax dodges like race horses. Expansion is due to creative destruction which creates insane levels of productivity. It wasn’t WW2 but the mass of humanity that returned from war, went to work, bought houses, started families… The problem with stealing intellectual property is you are stealing the creative destruction and the productivity it provides. China is living off our creative destruction. High taxes merely depresses productivity. It is a negative sequence of return

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5 months ago

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Casem

My solution to working more was to exploit multiple income streams. I was running a SDSC, doing Anesthesia, still taking call at the big house, and started a pain practice. The pain practice took 8-10 hours a week and doubled my income at virtually no increase in overhead. The pain practice also gave me some burnout resistance since it was totally my own show and not subject to one for all all for one politics. When in doubt don’t add, multiply. You still have the last dollar dilemma but double income at 15-20% more work made the deal palatable and… Read more »

Yup, I live in California. We have high income taxes here. That’s exactly why I have less of an incentive to pick up extra shifts and work more. The marginal increase in pay is not worth the disproportionate amount of time/stress/energy required to earn it.

Thank you so much VP. I agree there is a huge difference between my most valuable dollar which is easy to earn (which I consider money coming in from my passive income streams as such) and my least valuable dollar (which is active wage based money) which is the most painful to earn for me.

I never did get the rationale of denying high earners the ability to contribute to a Roth directly but allowing a backdoor method. It would make our lives so much easier to just remove the income caps (but of course since when does anything logical happen with the IRS)

I can honestly say I’ve never thought about this “last dollar” concept before — but then again, you know how I LIVE for a math equation ? It’s very interesting. And, beyond the numbers, that money “left on the table” is a worthwhile payment for a little sanity and time to recharge.

I think it ties in perfectly with my article on your site in the physicians cutting back series.

Yeah I thought it would be best if I showed actual numbers in the scenario and had to admit I was surprised myself when I did it (I wish I was smart enough to have said I did the math first and then cut back but I was getting burned out so I knew I was cutting back and only later realized that financially it was not as bad as I thought).

Thank you for the reminder here! I have it on my December plan to book as many business expenses as I can by the end of the year. There are some things I don’t NEED right now, but paying for them in December versus January can have a significant effect on my tax bill. Like a new laptop, for example. Some things like that I depreciate over time and I usually don’t decide until tax time, but if I didn’t spend the money in 2018 I wouldn’t have as many options.

I wonder how much happier everyone would be if they could work less. I think back to the stories of working in factories from my grandparents, and say wow I have nothing to complain about. The thing is though, I find mental work more draining than physical work. To be clear, it’s the fact that the work day more or less never ends. I am on call for my software work about 1 week a month, and even the other 3 I am still responsible if something challenging breaks in my other code. That takes a tole on you. I… Read more »

I have seen some studies published (can’t remember the country) where it was found that a 4 day work week was ideal. Workers were actually nearly productive in 4 days versus 5 days because they were more relaxed/recharged. I’m sure there is a limit to how low you can go before it becomes detrimental (I know if I take extended time away from work the first few days feel groggy as I struggle to get back into the swing of things). I agree that mental work has a toll on body just as physical work does. For me my week… Read more »

I thought I commented when I originally read this, but maybe that was only in my head since I don’t see it here. At any rate, I love this important concept. Between the concepts of “diminishing marginal utility of money” and our “progressive taxation system” more isn’t always better. Sometimes more money = worse QOL. When I went part-time my income went down but my QOL went up – largely due to these factors. I have more time to do things I enjoy and more time for my “self-care.” My wife and I didn’t notice the income drop at all… Read more »

Thanks WD for the comment. Yes at some point we have to prioritize quality of life otherwise we can just work ourselves to death. The progressive tax system really does no favor to those who sacrifice their personal life to bring in more money so your ROI on those last dollars is quite low (you pay a high price for the diminished return).